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NBFCs see minimal relief in borrowing costs despite aggressive rate cuts

Muted transmission of repo rate reductions keeps borrowing costs high, with analysts expecting full benefits to flow in gradually over 18 months

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Bajaj Finance reported a Q1 cost of funds of 7.79 per cent, down 20 bps from Q4FY25. L&T Finance recorded a 16 bps decline in Q1FY26, with borrowing costs at 7.84 per cent in Q4 and 7.83 per cent in Q3FY25.

Anupreksha Jain Mumbai

3 min read Last Updated : Sep 10 2025 | 9:08 PM IST

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Non-banking financial companies (NBFCs) have seen only marginal relief in borrowing costs despite aggressive monetary easing with a 100-basis-point cut in the repo rate between February and June,

Analysts attributed this to the muted transmission of rate cuts, particularly in borrowings linked to the marginal cost of funds-based lending rate (MCLR), which adjust slowly. They said the cost of funds for NBFCs declined by only 10-15 basis points (bps) during the June quarter (Q1FY26).

“The benefit each quarter may be limited to 10-15 bps. The full benefit of the rate cut is expected to be realised over 18 months, starting

Topics : Finance News NBFC Non-Banking Finance Companies